If Your Music Service Isn’t Free, It’s Probably Dying…

You can still charge for live concerts, t-shirts, vinyl, and satellite radio. For almost everything else, if it’s not free, it’s probably not doing so hot.

Consider these examples:

Free Services

How Free? YouTube is 100% Free; there is no paid option (at least not yet).

Result: YouTube is easily the biggest music service in the world. Some estimate that roughly half of videos watched on YouTube are music-related.

How Free? 17% of Pandora’s revenues last year came from paying subscribers (according to Pandora), thanks partly to a cap on listening hours. But Pandora quickly decided to erase those caps because of a drop in total active listeners.

Result: Pandora prioritizes free listening; they are the largest streaming radio provider on the planet.

How Free? Roughly 25% of Spotify’s users are paying subscribers, according to Spotify figures. But subscriber growth may be slowing dramatically, and Spotify is eliminating all caps and restrictions on free listening worldwide.

Result: Spotify is the largest on-demand streaming service in the world. And forcing almost every other streaming service to open free tiers.

How Free? 100% Free.

Result: Radio didn’t die, in fact, it remains one of the most powerful, mainstream channels for disseminating music and making songs famous.

How Free? 100% Free.

Result: BitTorrent is one of the largest, bandwidth-hogging protocols for acquiring massive amounts of free music. It is almost impossible to charge on this protocol; instead, artists like Pretty Lights have used BitTorrent to drive fans towards paid channels like live concerts.

Paid Services

How Free? Not at all: downloads costs anywhere between 69-cents to $1.29.

Result: Downloads declined for the first time ever in 2013; in 2014, they are continuing to slide according to Nielsen Soundscan data.

How Free? 0% Free (outside of limited promotional offers)

Result: Rdio is a fantastic streaming music service with a serious subscriber problem. Which is why the company is now opening a completely free tier of service to attract more users (and maybe, subscribers).

How Free? 0% Free (outside of limited promotional offers)

Result: Rhapsody is slowly starving. The company is rumored to be losing subscribers; Rhapsody recently fired their CEO and top executives amidst serious and ongoing losses and subscriber issues. Rhapsody is getting eclipsed by newer players like Spotify and Deezer, not to mention YouTube.

How Free? Not at all; even blank CD-Rs cost money.

Result: CDs are likely to become obsolete this decade.

How Free? Not at all (outside of limited free trials).

Result: Too early to tell, but this looks like an uphill battle.

Your Music.

How Free? You decide.

Result? Artists often find it impossible to block free channels; a growing numbers are shifting away from recordings as a revenue source and focusing on live concerts, merchandise, and more controllable channels. Only the biggest artists, like Beyoncé, can buck this trend.

More than likely, your fans want it for free. Or they don’t want it at all.

Are you sure it’s Spotify that’s causing other services to open free tiers, and not, as you describe it, “easily the biggest music service in the world” Youtube which is 100% free and doesn’t even offer a paid option?

Great point. It’s more accurate to say that Spotify is getting forced into free by YouTube, which then pushes the other streaming services (ie, Rdio on down) to also open their platforms for expensive free access. It is also putting inordinate pressure on someone like Beats.

In terms of an upcoming YouTube subscription tier, I think this has the potential to really transform the entire music space by offering a cleaner, better, more powerful selection of music that is cleaned and portable. Sort of like VEVO, but with everything (and no ads, global access, etc.)

The problem, bluntly, is Google in my opinion. This is an unwieldy empire prone to half-baked mediocrity (not sure if it’s still derided as ‘the next Microsoft,’ but there’s a lot of truth in that assessment). Which means, YouTube Music (or whatever it’s called) has a decent chance of ending up like, ya know… Google Play Music All Access.

Well, from what I’ve seen, ‘YouTube music’ or whatever they will call it, will certainly sign the death of any other music streaming services.
YouTube is the second largest search engine in the world, after…guess who? Google.
This mean people search for stuff on YouTube more than on Bing, Yahoo…etc.
And most people already search for music on YouTube naturally which gives them a nice competitive advantage already.

At present I think only iTunes, YouTube, and CDs are believed to be profitable as music services. (Bittorrent Inc claims to be profitable, and probably is, but it is not a music service as such.) iTunes and CDs are not free to users. YouTube is free to users but profitable because it is part of the world’s most successful advertising business.

All of the services are legal with the exception of Bittorent and YouTube. Bittorrent and YouTube are massively used for illegal purposes, but have not (yet) themselves been adjudged illegal. YouTube is vulnerable to charges of copyright infringement if it fails to take adequate action to block persistent infringing users. Bittorrent seems to have devised its service cunningly enough to avoid the legal pitfalls which its predecessors (Grokster, etc) fell into, but its immunity could be removed if the DMCA is properly reformed.

So it could be said that all of these services (except for traditional radio, iTunes, and CDs) are either unprofitable, legally questionable, or both, which is not a recipe for long-term success.

Not exactly. There are plenty of attempts to control the BitTorrent protocol. Look no further than BitTorrent, Inc., a group that (unsuccessfully) decided to attempt to control and monetize this platform.

Or look at BitTorrent Bundles, used quite effectively by Pretty Lights.

ITunes sales have slumped in 2013-2014 because of free streaming services takin legitimate buyers out of purchasing music – This is contrary to the utopian claims of Spotify that they take consumers out of piracy, which they pedalled to Social a Economic forums and a like to justify their business model.

Consumers will vote with choice and seek music from other sources outside Spotify, particularly if they are looking for inspiration and not bundled corporation.

I think many of us, myself included, are giving Beats Music a ( very ) temporary pass. Given that Jimmy Iovine, a long time, respected, record guy, was part of their decision making process to allow unrestricted access to their entire catalogue of millions of songs, is a tragedy.

Beats Music could have been the go-to service and had many more artists give them exclusives, where they windowed other streaming services. They just missed a huge opportunity to differentiate themselves from the competition.

These streaming services came to the table with what they believed would be the killer App without considering the impact they would have on the very artists they use to drive their business. They convinced the VC community and deep pocketed financial services like Goldman Sachs that their business would “revolutionize” the consumption of music and be highly profitable.

There have been many detractors that question whether these streaming services could be profitable. In the process they reinforced the belief that music could be had for free. Now it appears the detractors were correct, it doesn’t appear they will be profitable.

What a tragedy, that they would cause so much damage and pain to the very people who turn their lights on every morning.

“Result? Artists often find it impossible to block free channels; a growing numbers are shifting away from recordings as a revenue source and focusing on live concerts, merchandise, and more controllable assets. Only the biggest artists, like Beyoncé, can buck this trend.”

This is one of the most ill informed comments I’ve ever seen. In fact, it’s the Beyonce’s of the world with a lifetime of major label exposure that CAN live as millionaire’s from touring and merchandise. It’s the independent artist that depends on people having some respect for them and paying for their work. The consumer has become too comfortable with independent artists having nine to fives AND being touring musicians. I’d love to see some of these bit torrenting blood suckers try that life style for ONE MONTH.

As musicians we need as many revenue streams as possible, no matter how small. Selling recordings gives an independent artist the funding needed to press up shirts and put gas in a car for a regional tour. If you support indie artists, that’s what you do, you SUPPORT them.

Beyonce hasn’t become a bigger artist by focusing on touring and merch. She’s done it because she’s been a major label artist that sells units, before and after the free and streaming booms thanks to huge budgets. This writer can’t see the forest through the trees.

The Beats music subscription thing seems pretty smart. Mind you going against Apple who is entering the space along with Pandora who is already established is going to be brutal. I bet that Beats will try and offer free subscriptions trials with their headphones. They are moving tons of units so they could try and use their hardware sales as a way to get consumers to try their digital goods products. Just my 2 cents.
Jayson Postle
Founder of White Lotus DJ & Events